Confusion over PACs in city campaigns explained

As normal citizens may not be aware, last week (July 15) was campaign cash Christmas, when candidates must file reports showing what they’re raised and spent during the first six months of the year.

Though all Texas candidates (and in some cases former candidates) must file, last week’s festivities obviously were most interesting locally for city of Houston races, to be contested Nov. 5.

Hall

Mayoral challenger Ben Hall scraped together $2 million, $1.7 million of which was his own money. Dwight Boykins racked up a strong $150,000 in contributions for an open District D race and Ben Mendez leads fundraising for the open District I seat with $94,600. Michael Kubosh is atop the At-Large 3 stack, but $96,000 of his $109,300 in contributions were from himself, so it’s worth also noting Rogene Calvert’s $84,000 haul. Challenger David Robinson entered July with three times the cash of incumbent At-Large 2 Councilman Andrew Burks.

Among the topics bandied about last week was why Hall and District A candidate Brenda Stardig (who is seeking to regain the seat she lost in 2011 to current incumbent Helena Brown) had formed specific-purpose political committees, or SPACs, as part of their campaigns.

There was speculation that Hall, in particular, may have fallen afoul of city ordinance by his PAC spending more than $10,000 in

Stardig

coordination with his campaign (Stardig’s had only spent $1,300 as of June 30, thus under the $10,000 limit).

The city’s rules are similar to federal guidelines on this: If a PAC coordinates with a candidate, it is capped at $10,000. If it just sends the check and doesn’t help decide how to spend it, the support can be limitless. City Attorney David Feldman said he planned to contact Hall and Stardig’s campaign treasurers to discuss the issue, given that there was clear evidence of coordination in both camps: The PACs, for instance, carry the candidates’ names (as opposed to the typically vague variety, such as Karl Rove’s Crossroads GPS or satirist Stephen Colbert’s Making a Better Tomorrow, Tomorrow).

Jerad Najvar, an election lawyer Hall consulted, and Susybelle Gosslee, who works compliance for Stardig, said there really isn’t any intrigue here.

Najvar points to Section 18-2 of the city code, which states, “To the extent that any candidate elects to receive contributions or make expenditures through a (SPAC) … then the (SPAC) shall be regarded as the agency of the candidate, and the actions of the (SPAC) shall be deemed to be actions of the candidate.” These actions explicitly include, ”The soliciting or accepting of a campaign contribution or the making of a campaign expenditure.”

But perhaps these candidates were seeking to get around the $5,000 limit on individual contributions, or around the limits on the amount of personal loans candidates can repay themselves using campaign cash: $75,000 in the mayor’s race, $15,000 in an at-large race and $5,000 in a district race?

No again, said Najvar and Gosslee.

“You either file a report that says ‘Ben Hall,’ personally, or you file a report that says ‘The All for Hall Committee.’ Substantively the law is no different,” Najvar said. “Filing an SPAC does not allow you to get around any contribution limits or any other limits. When you’re a candidate, you have a campaign account: It’s either filed on a COH (individual) report or an SPAC report, and it doesn’t matter which one.”

“No candidate benefits financially from having an SPAC,” Gosslee agreed.

Gosslee also said there are several logistical reasons to form a committee rather than an individual candidate account. SPACs place more liability on the campaign treasurer, she said, making it likely that person will get more actively involved in the campaign. When campaign workers receive IRS forms showing their wages from the campaign, she added, forms issued in connection with an individual account carry the candidate’s personal Social Security number, whereas an SPAC gets an IRS-issued tax identification number.

Gosslee said there can also be psychological benefits to a committee structure: Some donors see such a structure as more official, she said, and it lends more of a team feel to discussions of campaign money.

“Even though Brenda sees the information and so forth, it’s another person creating another check, figuring out as a team where do you want to put your campaign funds,” Gosslee said. “It just brings in more of a team.”

When I asked Hall about the issue, he said simply, “We believe it gives us options that are more advantageous to raising money. We have a committee that’s raising money on behalf of the campaign, in compliance with the city ordinances and state statutes.”

Feldman said it’s difficult to reconcile the section of the code Najvar mentioned with the section that prohibits coordination of more than $10,000 between “PACs” (a more outdated term, Feldman said, as compared to “specific-purpose political committee”) and campaigns. The two sections of the ordinance should have reference each other, Feldman said.

“At a bare minimum once this election is over we’ve got to take a look at that whole thing. It’s got to make sense,” he said. “It shouldn’t be something that we have to sit around and have to debate what it means and how it works.”

If the Stardig and Hall campaigns’ reports on Oct. 15 (the next deadline) show violations, Feldman said, he would consider taking action, but he said the confusion over “coordination” alone would not raise any concerns if the candidates treat their PACs like individual accounts.

I caught former City Councilman Chris Bell, who authored the ordinance in 1992, while he was travelling and didn’t have the wording in front of him, but he said the situation, as described by the campaigns, doesn’t raise any significant concerns for him.

“The fear in the drafting of the ordinance was that an outside entity that had not raised money in accordance with any of the guidelines could then turn around and spend whatever amount of money it wanted to fund a candidate,” he said. “That’s a little bit different if they’re abiding by the campaign finance restrictions because that really isn’t a violation of the spirit, it’s basically just setting up a separate entity to finance your campaign. That really doesn’t offer any big advantage to the candidate.”

One Response

Strip back the in-kind donations and self-funding, and you’ll have a better idea if a candidate ‘really’ stands a chance. The District I race is interesting because only 2 candidates had very few fundraisers, but pulled in some impressive dough from individuals, reported minimal in-kind donations and minimal self funding. There will be a runoff between these two.